ENHANCED DUE DILIGENCE QUESTIONS ?

Readers with questions about Enhanced Due Diligence investigations are encouraged to email them to me at : miamicompliance@gmail.com

Interesting general questions about effective EDD trade-craft will end up in a future article, available to all. (with your name deleted, of course) Your specific queries will be answered in confidence, and if I can provide anyone with a suggestion, or even a solution, I will be happy to assist.  Feel free to correspond.

COUNTRY RISK NOW AT AN UNACCEPTABLE LEVEL AT KRG

Country Risk at the Kurdistan Regional Government (KRG) of Iraq has now climbed to unacceptable levels. This means that the risks of money laundering, terrorist financing, or sanctions violations are so high that it must be assumed that most international financial transactions, involving banks located in the KRG, violates at least one of these illegal acts.

The facts:

(1) Huge amounts of currency is shipped, via armoured courier, daily from Iran, into banks operating in the Kurdish Autonomous Region. AML/CFT Compliance is non-existent, and cash is king.

(2) Iranian oil is delivered to Kurdish-controlled Iraq, and is thereafter co-mingled with, and sold as, oil of Iraqi origin. Apparently, there is no technical means of identifying an Iranian component in such a combination.

(3) Corrupt Kurdish politicians, who are granting licenses and permit to international energy companies, are taking in millions of dollars in bribes and kickbacks, are diverting oil profits, and stealing whenever conditions permit. Corruption is the rule, rather than the exception.

(4) The military wing of the Kurdistan Workers' Party often seeks safe haven inside KRG territory, and  the PKK is a designated terrorist organisation. Kurdish separatists in Syria, allied with the PKK, have further complicated the threat to Turkey, and a major cross-border armed conflict could occur, which could disrupt normal banking, and indeed the entire economy, in the KRG.

You cannot properly monitor this risk from outside Iraq; any designated local agents will either be corrupted, and therefore co-opted, or otherwise rendered ineffectual.

I rarely advise readers to red-line an entire jurisdiction, but I am afraid that it is the only prudent move. Otherwise, I fear that US and EU financial institutions that maintain correspondent relationships with KRG banks risk serious fines & penalties, in the ongoing Iran sanctions violations enforcement programme of United States regulators and law enforcement agencies.

HOW FAR WILL US GO IN PUNISHING IRAN SANCTIONS VIOLATORS ?

The large number of information leaks, some of which are obviously intentional, indicating that US regulators and law enforcement agencies are about to levy fines and penalties on some of America's largest banks, verifies that the "take-no-prisoners" approach to Iran sanctions violators is about to name and shame some American financial institutions at the top.

Buried in the details, however is a footnote that should be of critical interest to compliance officers intent upon keeping the Iran scandal out of their banks: that most of the suspicious transactions, either originating from, or destined for, the Islamic Republic of Iran, involved third-party banks, and that the position of the largest US banks is that they were just acting as middlemen.

Whether this detail will be taken as a mitigating factor in the determination of the size of fines is not known, but what is important is that the accusation of greater culpability will be pointed at the smaller banks, who initiated and/or completed the transactions. Did they cover up the role of Iranian banks or entities ? Did they manipulate or alter the facts ?

US Government investigators will certainly be taking a hard look at financial institutions located in those jurisdictions which have correspondent relationships with the big American banks AND are known to have had long-established relationships with Iranian banks and entities. Banks located in the UAE, especially Dubai, Venezuela* and Panama would seem to be the prime candidates for intensive queries.

The matter is made even more serious by the fact that banks in both countries have subsidiaries, branches, agencies, offices, and correspondent relationships in the United States, making them vulnerable to both subpoenas**, and to seizure of assets.

Assessing the level of risk involved in maintaining continuing relationships with banks located in Venezuela and Dubai has been difficult, but given the intensive American efforts to weed out, and exact penalties upon, any financial institution found to be facilitating Iran sanctions evasion, prudence requires that you ensure that you are not unwittingly assisting Venezuelan or UAE banks with their Iran business. The odds are that US investigators, pursuing leads obtained in their quest against major  American banks, may uncover transactions that passed through your bank, if you don't catch them first.

Employ Enhanced Due Diligence in your dealings with Venezuelan, UAE and Panamanian banks, lest you get scorched from the heat surrounding the Iran sanctions investigations. Do not let your bank be one of the casualties; check out all suspicious transactions on a real-time basis.

____________________________________________________________________________
*Venezuelans using 700 Panamanian Companies to Evade Sanctions on Iran
**In Re Grand Jury Proceesings (Bank of Nova Scotia), 740 F.2d 817 (11th Cir.), cert. den. 469 US 1106 (1985). 

RAISE COUNTRY RISK ON VENEZUELA AND THE DOMINICAN REPUBLIC

Recent smuggling tracks

The latest US law enforcement information on current trends of narcotics smuggling into CONUS (Continental United States) shows that traffickers, who tend to respond swiftly to law enforcement actions, have now transferred much of their activities from Central America, back to the Caribbean. The United States latest tracking map clearly shows that the Caribbean routes are back once again.

Virtually all of the maritime and airborne smuggling from the north coast of South America is now embarking from port and airfields in Venezuela, or flights from the Colombian frontier that pass over Venezuelan airspace. Only a small number originate from Colombia's Caribbean coast.

The final destination of most of the aircraft and vessels is clearly the Dominican Republic. Honduras comes in second, with approximately 15% of the trips. Haiti, Nicaragua, Panama and Mexico represent but a small number of air and maritime smuggling operations, according to the chart.

When any jurisdiction is flooded with narcotics traffic either outbound or inbound, financial institutions are affected:

(1) Wholesale payment for the drugs generally occurs. Large amounts of cash will be required.

(2) Bribes and kickbacks are generated, to law enforcement, government officials, other recipients.

(3) Payments for storage, transit, port or airport use, and other fees, legal and illegal, occur.

(4) Front companies, to shield the criminal activities, must be maintained.

(5) Money launderers find that the need for their services will increase.

(6) Backhaul of drug profits, through bulk cash smuggling, and placement into local financial institutions will be needed.

All these events operate to raise risk levels for the jurisdictions involved.

For the above reasons, it is submitted that compliance officers who are responsible for calculating risk levels consider that these developments justify raising Country Risk for Venezuela, and for the Dominican Republic.

Previous activities

BULK CASH SMUGGLERS SWALLOWED $80,000

Some of the seized money

A Venezuelan and a Colombian engaged in bulk cash smuggling were arrested this month, after arriving at the international airport in Medellín from Costa Rica, They were found, after body scans revealed abdominal items, to have swallowed a total US$40,000 each, contained within forty latex capsules of $1000 each, similar to those used to smuggle heroin inside the body.

Colombian officials at the scene claim that this is the first time they have observed the use of this method. It is expected that these individuals, who claimed not to know each other, will be charged with money laundering.

José Maria Córdova International Airport (MDE)

KEN RIJOCK WILL BE LECTURING AT FFIEC THIS WEDNESDAY

If you are attending the Financial Crimes Seminar this week in Arlington, at the FDIC Seidman Center, conducted by the Federal Financial Institutions Examination Council (FFIEC), I will again be conducting the Money Laundering  segment on Wednesday, from 1 and 5 PM.

TREAT HIGH-VOLUME HEALTH CARE BANK CLIENTS AS POTENTIAL RISKS

The explosion of Medicare and related health care fraud in the United States, a billion-dollar problem that appears to be increasing exponentially, is a cause for concern, especially in Florida, whose large population of retirees have made it Ground Zero for Medicare Fraud.

 Some Florida examples:

(1) Fraudsters who literally import their figurehead from inside Cuba, bring them into Florida to run criminal enterprises that bill the us government of non-existent treatment, care, medications and medical appliances. The manager is later returned to Cuba, from where he cannot be extradited, due to the lack of diplomatic relations with the US.  Dozens of convicted drug felons have moved into the fraudulent health-care field, abandoning their previous "profession" for crimes which are seldom discovered in progress, and which rarely expose the perpetrator to the risk of real-time arrest.

(2) A convicted money launderer and drug trafficker, after release from prison, opens a home health care business, in his wife's name, which billed for over $45m for phantom home treatments. over $30m paid to the fraudsters. He was sentenced to ten years this week, and his wife to eight years.

(3) Medical equipment suppliers and home-care service suppliers appear to be the largest single group of fraudulent operators within the industry.

Bankers whose clients include high-volume health care providers are advised to:

(1) Conduct Enhanced Due Diligence on all owners and officers of the clients' companies.

(2) Check out relatives and family members of officers and principals; these people always use fronts without criminal records.

(3) Is the company a start-up with a new record of rapid success ? if so, what businesses were the principals and officers engaged in previously ?

I would consider health-care clients now as high risk, unless they have a long, satisfactory track record. Remember, criminals can also acquire small, old companies in the industry, and ramp up their business.

ARRESTED HEZBOLLAH AGENT HAD BOGUS BELIZE PASSPORT

Mexican authorities in Merida have conducted a raid, and arrested three members of a suspected Hezbollah terrorist cell. Their leader appears to be  Rafic Mohammad Labboun Allaboun, a Lebanese-American citizen who is a convicted felon, and who violated his parole by leaving the United States after his release from prison. Allaboun was arrested along with two other Lebanese, both of whom hold passports from Belize, showing them to be naturalised Belizeans. He was swiftly deported to the United States.

What is noteworthy about this case is that Mr. Allaboun also had a Belizean passport, showing him to be a native-born citizen of that country, under another name. Here's his bogus drivers' license:

When law enforcement officials in Belize made enquiries, they found:

(1) The name that he was going under was that of a Belizean who died in infancy.

(2) That the death records of the infant were missing.

(3) That Allaboun's passport application records were also mysteriously missing.

(4) That the home of one of the government employees who was involved in the issuance of multiple documents for Allaboun burned down when the enquiry began.

Local Media depiction of the raid.

It is not known whether the passports of the other two Lebanese were procured by fraud. Allaboun and his associates are believed to be Hezbollah operatives. Those detained have been linked to specific criminal activities:

(1) The seizure of cocaine in the Republic of Panama.

(2) A stolen car ring that obtained vehicles in Central America, and sought to fence them in Belize.

(3) Human trafficking.

(4) Cheque fraud.

There is a report that these agents were involved in criminal activities for the purpose of obtaining funds for bail, that was to be used to obtain a release, for other Hezbollah operatives, currently in custody in the United States. Those individuals have not been publicly identified.

Since it is obvious that corrupt Belizean government officials were responsible for issuing Allaboun's passport, it is humbly suggested that you run your bank customer list, and extract the names of any Belizean clients whose place of birth was outside Belize, meaning that they are naturalised citizens, and perform Enhanced Due Diligence upon them forthwith, to rule them out as users of bogus passports, or members of Hezbollah.

AMERICAN CONVICTED OF MONEY LAUNDERING RELEASED IN NICARAGUA

Jason Puracal, a former US Peace Corps volunteer who was convicted of money laundering in Nicaragua, in what some legal observers believe was a purely political case, has been released from prison by an appeals court there. Puracal, who remained in Nicaragua after completing his Peace Corps tour there, had been sentenced to 22 years, for money laundering, drug trafficking and organised crime. Efforts to overturn his conviction, reportedly marred by errors and prosecutorial misconduct, were successful after two years; Puracal had maintained his innocence.

The Nicaraguan Government charged him with operating his real estate business as a front for money laundering, which was denied by Puracal, who claimed that the deposits were legitimate real estate transactions. Since Mexico enacted laws that severely restrict the deposits of US Dollars, money launderers have targeted Central American countries, where anti-money laundering law enforcement is generally weak.

Anti-American sentiment on the part of elements within the leftist Nicaraguan Government is thought to have been the cause of Puracal's arrest. The appellate court found, as a matter of law, that the arrest and prosecution were flawed, and overturned the conviction. Puracal's attorneys have announced that he intends to stay in Nicaragua, where he has lived with his family since his Peace Corps days.

BEIRUT: COCAINE GATEWAY OR MUCH MORE ?

Two unrelated events this week reminded us that narcotics from South America can end up in the Middle East, and that Beirut appears to figure prominently in the cocaine trade, in more ways than one. The internal connections are not what one would expect, and they are always a factor in identifying unusual money laundering pipelines.

First, We have a seizure, at the Beirut-Rafik Hariri International Airport, of 20 kilos of cocaine powder, made up to appear to be gift candy. The destination and the nationality of the couriers : Australia. My compliments to airport security staff.

Second, upon arrival at the port, a shipment of "motorcycle parts" from China to Beirut was discovered by the authorities to contain a complete drug laboratory, suitable for processing cocaine. Does this mean that unrefined coca or cocaine base is being shipped direct from South America into Lebanon ?

The seized laboratory

Add up the two events, and you can see that transnational crime operates where one least expects it. Lebanon is neither a known manufacturing nor transit location for cocaine, yet we see here evidence of both. Compliance officers need to be alert to the possibility that international transactions between Colombia, Peru and Bolivia on one hand, and Lebanon on the other hand, may not be legitimate trade; watch this one.

WILL DISCLOSURE OF WHISTLEBLOWER PAYMENT EXPOSE MORE SWISS BANK TAX EVASION SCHEMES ?

The publicity generated by the disclosure that UBS whistleblower Bradley Birkenfeld has awarded the former private banker over one hundred million dollars could cause others with inside knowledge of Swiss bank tax evasion schemes to seek to cash in on their information, which would impact those banks still engaged in assisting US taxpayers to cheat the taxman. The news of Birkenfeld's payment  seems to have been placed on the front pages of major media.

Large fines and penalties, such as the $780m fine levied upon UBS by US regulators, could cause serious reputation damage to any Swiss bank unfortunate enough to be named and shamed, and cause massive depositor exits. Should there be a number of new cases, Country Risk for Switzerland would be affected. Cantonal and regional Swiss banks, some of which are believed to have picked up substantial US client business from the larger institutions, in the wake of the UBS scandal, could have profit issues if they are fined a large sum.

On a more basic level, the possibility of a million dollar payday could drive some bank staff right into the arms of US law enforcement agencies. Again, the issues here are resultant Reputation Damage, and an increase in Country Risk. We shall see if any other whistleblowers surface

9/11 FORT LAUDERDALE FOOTNOTE

Atta's Florida Drivers' License

Today's mystery; An individual, who identified herself as the wife of Mohamed Atta, the leader of the 9/11 hijackers, showed up, just before the 11 September, 2001 attacks, at the Broward County Courthouse, in Ft. Lauderdale, Florida. The unidentified individual, dressed in the Middle Eastern style, attempted to clear up his outstanding traffic tickets, according to a report released today.

There is no record that Atta was married; he did have a bench warrant for failing to appear in court. the woman was unable to take care of the warrant,  because it required Atta's personal appearance. Shortly after she left the building,  9/11 occurred in New York and Washington. I am wondering why she made her appearance, and who she really was.

Atta's Visa

COLOMBIA'S REJECTION OF CEASEFIRE WITH FARC MAY HASTEN CAPITAL MOVEMENT

The President of the Republic of Colombia has categorically rejected any ceasefire with the Revolutionary Armed Forces of Colombia, the FARC,  when negotiators for both parties meet next month in peace talks. With the FARC suffering the loss of several of its senior leaders recently, and with diminishing numbers, due to desertions, and a lack of new recruits, this is probably a wise move, but there is another issue which should be considered a real possibility if you are a banker.

 Since disarmament is said to be a non-negotiable element of any peace agreement, the FARC may later be in a position where it may be feeling insecure about protecting all the wealth  (i.e. US Dollars and Euros) that it has secreted within the territory it controls. FARC money managers may choose to move (and in the process launder) a substantial portion of the currency outside the country, lest it fall into the hands of armed criminal elements, or the successors of the AUC ( Paramilitaries). It also does not want all the drug and kidnapping profits to be seized by the Ejército Nacional de Colombia (Colombian Army), and forfeited as criminal proceeds.

If I am a money launderer for the FARC, I might be receiving orders this month to bulk cash smuggle millions of Dollars and Euros into Panama, Ecuador, El Salvador or any other jurisdiction where all greenbacks are welcome, and Source of Funds, and Beneficial Ownership, are never a consideration. Once there, I am, of course looking for a nice, safe US or EU bank for my client's money. You may want to watch out of any spike in bulk cash, coming from any Western Hemisphere country where the dollar is the official (or unofficial) currency of the realm, during the next few months, especially if any meaningful progress is made during the upcoming talks in Norway, or later in Cuba.

_____________________________________________________________________________



 

ESCROW LAWYER SUED IN ADVANCE FEE SCHEME

El Paso County District Court

Readers of this blog who have been following the Ponzi Scheme/Advance Fee scandal involving defunct Atlantic Rim Funding Corp., and its principal, Steven "Dean" Kennedy now have yet another lawsuit to follow. The new civil action, which names former Atlantic Rim lawyer Christopher Brenner as the defendant, alleges that Brenner illegally broke escrow on a deposit, and owes the plaintiff corporation $500,000 .

The lawsuit, styled 21st Arlington Property LLC vs. Christopher Brenner*, filed in Colorado Springs, alleges:

(1)  That the plaintiff deposited $610,000 into escrow, with the defendant attorney, in connection with an agreement with Fundamentum Capital Solutions LLC to provide funding. The deposit was to be returned in 120 days.

(2) According to the complaint, Brenner broke escrow, and the deposit was used to purchase "non-marketable bonds." It was not timely returned to the plaintiff, who did get $110,000 back at a later date, The plaintiff is still owed $500,000 . Apparently, there were some extremely damaging admissions made by the defendant.

(3) The contract listed the plaintiff as Brenner's "client." thereby creating an attorney-client relationship, and a fiduciary relationship regarding the funds existed, serious violations which could result in his disbarment, or even the filing of criminal charges.

(4) The three counts of the complaint are: Breach of Contract, Negligence, and Conversion.

Whilst  it is not a party to this lawsuit, some of the individuals at Fundamentum Capital have appeared on the Mortgage Grapevine electronic bulletin board online, extolling Brenner's virtues, especially when victims of Atlantic Rim's Ponzi scheme have made negative remarks about Brenner's actions. The Complaint is silent about Fundamentum's duties and obligations.

Steven "Dean" Kennedy has represented to prospects that he is working with Fundamentum, and thus the issue is raised; was Kennedy involved in this matter, and was it an Advance Fee scheme ?  We shall update on this case as it unfolds.
__________________________________________________________________________
* Case No.: 12-cv-3033 (El Paso County Dist. Ct., Colo.)

IS CANADA FREEZING ACCOUNTS OF IRANIAN RESIDENTS ?

Reliable sources in Canada's Iranian community are claiming that the Government of Canada is now freezing accounts of Iranians who are residents, and against whom allegations of immigration fraud have been made. It appears that false claims of actual residence periods, within Canada, have occurred, as well as misstatements of material fact, made in connection with immigration applications.

Canadian authorities have stated that the immigration status of 3100 applicants will be revoked or denied, and that action has already been taken against approximately 600 individuals for immigration fraud. Another source claims that as many as 11,000 individuals may be affected.

There is an unverified report that Canada will also be seeking to seize and forfeit real estate, and other assets of immigration fraudsters, as well as the immigration consultants that allegedly conspired with them to falsify residency.

If you haven't read my article posted on Sunday, Watch for Iranian Flight Capital leaving Canada this week, you may find it useful.